With the closure of Filmstruck and sale of Fandor, it looks like the online audience isn’t there for a standalone classic movie service. Is there a model that will work?

SVOD classic movie services struggle, fail

Classic movie fans can’t seem to catch a break. The beloved but apparently under-subscribed FilmStruck closed its digital doors on November 29th. Fandor, the independent-film streaming service, stepped in with a special 50% discount offer for FilmStruck subscribers. Now its future seems cloudy. Fandor laid off nearly all its employees and transferred its assets to a new entity, Fandor ABC LLC, in anticipation of finding a buyer.

GlassRatner Advisory & Capital Group is managing Fandor ABC LLC. Seth Freeman, an executive of GlassRatner, says the service is not dead:

“The Fandor.com site will continue streaming movies without interruptions. It is not out of business or going out of business.”

How long things will stay that way is hard to say. A buyer of the business does have the right to continue to operate Fandor.com, according to former Fandor CEO Chris Kelly. However, there is no guarantee the purchaser will do so.

Not essential viewing for most

Like it or not, classic movies are not mainstream viewing for most people. When asked to pick their ideal channels in an a la carte pay TV package, just 18% picked Turner Classic Movies. It was in 58th place, far behind classic TV channel TVLand (41st.)

This low placement is a good indication that most cable customers spend little or no time watching TCM. Though the channel is one of the few places viewers can watch ad-free without paying a premium, more people would rather pay a premium and watch more modern movies. Cinemax ranks 35th, Starz 30th, and HBO 7th, all far above TCM.

$6 a month too high a price for classic movies

FilmStruck charged subscribers $6.99 a month for a basic subscription and $4 more to add The Criterion Collection of classic movies. It also had one of the best app experiences, built by Youi.tv, that this author has ever seen. Fandor charges $5.99 a month for a somewhat more eclectic mix of classic movies, documentaries, and international films.

WarnerMedia CEO John Stankey recently commented that Filmstruck and sister services Machinima and Boomerang had less than half-a-million subscribers between them. Machinima and Boomerang have not been closed, suggesting that FilmStruck may have been the weakest performing of the three. Given the questionable state of Fandor, it certainly hasn’t fared any better.

The failures of FilmStruck and Fandor does not bode well for the Spring 2019 launch of The Criterion Channel SVOD service. According to a press release from the company it will pursue the same model as Filmstruck:

“The Criterion Channel will be picking up where FilmStruck left off, with thematic programming, regular filmmaker spotlights, and actor retrospectives, featuring major classics and hard-to-find discoveries from Hollywood and around the world, complete with special features like commentaries, behind-the-scenes footage, and original documentaries.”

Presumably, the subscription will be in the $6 price range. However, with a more limited range of content, it could be a tough sell even at a significantly lower price.

The right model for classic movies

Filmstruck and Fandor’s problems could suggest that the online video market cannot sustain a standalone classic movie service. Perhaps the best way to realize the value of the movies could be as they are today in pay TV, as part of a broader bundle of content. The Criterion Collection is backing both approaches. In addition to the standalone Criterion Channel, the movies will be available in WarnerMedia’s pending Q4 2019 service.

Why it matters

Classic movie SVOD services are struggling to build a viable service online.

Filmstruck has failed, and Fandor is struggling to survive.

The best way to reach consumers with classic movies online could be in bundles, as they traditionally have done in pay TV bundles.

(2) Comments

Thank you for this discussion of Classic Movies. Something I think many have interest in.

I think this is a very old story. Big Media Library holders have absolutely no idea who their customers are and what motivates individual customers to spend money. With the migration to on-line, content stewards are now forced by the nature of the ‘individual experience’ to sell to individuals. They have never been any good at this. They only know how to generate new mass market product and get it into distribution channels real FAST and DENSE. BTW, this isn’t easy – so hats off for that.

Thinking back to the Home Video era, no video stores could over-specialize in anything and survive very long. Even an eclectic Mom ‘n Pop store made most of their money on that “New Release” shelf. Film Buffs would pick up a new release that their wives would enjoy and at 2-for-1 pricing grab that copy of “Out of the Past” that they’d watch half of after the kids were asleep. Nobody made a trip to the Video store just for an old movie – on a regular daily basis. Maybe a few times a year, but not on a regular paid basis – and that’s the important distinction. Video Stores became interim content aggregators of sorts. Every Video Store needed to buy one rental copy of a core set of titles in order to have that ‘safety stock’ on hand. Studio guys knew this and planned for it when they mastered a title from their deep catalog. The question was, will Blockbuster, Hollywood (RIP) and the little guys buy one copy for each store? If the answer was “Yes” then it was profitable to master a cassette or DVD, manufacture 10,000 copies, ship most of them out on a single Tuesday street-date and then park the remaining copies at a warehouse for the ones and twos and Christmas season that would follow. Most of the investment was recouped immediately.

This Catalog strategy was largely successful because it did something very traditional. It was big guys putting cost burdens on little guys. Rental didn’t work like retail sell-through. Once a rental was part of the fleet, the shop was stuck with that product. It was on them to wring money from it. Thus the ubiquitous rent one and get one free approach. Only brand-conscious Disney allowed a bounty on returned rental tapes and disks. “We don’t want ‘Snow White’ on the $.99 close-out shelf.”

But Library Holders are strangely arrogant. They think they can do it all and this appears to be a a long-held fantasy. Big Music fought tooth and nail to defeat Napster and other on-line early adopters to utter ruin. Music companies are now very fat and happy because then finally understood that they could get rid of all those replication facilities, warehouses, and supply chain gurus (the ones who look like ZZ-Top without grooming) and just push relatively small data files and images out through channels for a standard profit – much better to leave the customer crap to someone (like Spotify or Apple) who actually understands why people spend money. Oh my, sounds like a video store – and indeed it is the very same model on a larger scale – without the fixed cost recovery that came with physical product. On music apps, we now have new releases and there’s that Blues tab and that ’60s tab. But try to make a curated Jazz Standards channel that costs something each month – forget it.

Anyway, the tremendous cost of developing a successful and user-loved content delivery platform is not trivial. Making it sticky and having people stay with it and more importantly be willing to keep paying for it each month is like winning the lottery – good trick everyone once in a while but really hard to do forever.

The Studios tried to get ahead of this with the Hulu venture – and it wasn’t a terrible solution. I was a Hulu subscriber some years ago, when most of the very Criterion Collection we are discussing was available on that platform. It was perfect for a movie fan like myself. I could watch a bit of new TV. There were some new and not so new Feature releases. My watch list consisted of all Criterion titles. I was willing to shell out actual money for that platform. Then Criterion left and I dropped immediately.

I remember thinking at the time: Great, another arrogant content library will create a new platform, lose their shirt and start to think that Catalog content maybe has little value. I’m waiting, and I think I’ll be rewarded for this, for Criterion and other classic content to return to Hulu or a similar large aggregator, which is where it belongs. Because, most folks who say they like old movies, those folks like the idea of the old movie being available on-line – and that’s kind of enough for them to ‘stick’ with an aggregator.

Grafton, thanks for the thoughtful comments. I think I’ve reached the same conclusion as you, that the movie greats are best surfaced in bigger bundles. We shall have to wait nearly a year for the Criterion Collection to appear in the WarnerMedia service. Assuming the Collection’s app is available before that as a standalone subscription, will you sign up?